April 24, 2012

What to Do if You Catch a Tax Mistake

There’s probably no worse feeling than realizing you made a huge goof. And when that error is on your taxes? Forget about it – sheer panic. You already sent in your 1040 and Schedule C to the IRS, so game over. Might as well jump ship and move to Australia.

At least, that’s what you would do if you didn’t already know about the 1040X. Wait, you don’t know about it? Well, let’s fix that right now! The 1040X is one of the handiest of the tax forms as it’s practically saved thousands of people from having heart attacks for years. It’s definitely one to know about.

What Is the 1040X Form?

The 1040X, or the Amended US Individual Income Tax Return form, is a way for you to send in a corrected version of your tax filings. If you ever realized after sending in a form that you forgot to include a 1099 or include a deduction (or put in one too many!), this is the form for you.

This year, one of the big selling points of the 1040X is the existence of late 1099-K forms. Some online sellers have even gotten them only a few weeks before the deadline! This meant that they had most likely already filed and now had a completely new form to file. Luckily, the 1040X was there to save the day.

The actual form takes a little while to complete. This is mainly due to basically having to do everything twice. You have to include the information that was incorrect on your original filing, also making sure you include the corrected version of everything.

You have up to three years after the initial filing was due (for instance, for 2011 taxes you would have to file the 1040X by April 17th, 2015), so there’s no huge rush. Take your time and get everything right the first…well, second time.

Particulars of the 1040X Form

There are a few particulars about the 1040X that are worth mentioning. For one, we mentioned taking your time to get everything right. Well, the IRS even says they recommend you wait until you get your refund or later before filing the 1040X. Why? Who knows, but it shows they’re not worried about getting your amendment instantly.

Also, there are a multitude of reasons to file an amended return. Did PayPal send a really late 1099-K? How annoying, but at least you can fix it. Just realized you could’ve deducted a portion of your mortgage and utilities because you operate your business out of a dedicated home office? That might result in a much larger refund – send in a 1040X as soon as you can.

If any of your fixes include a revised schedule such as a Schedule C to detail self-employment income and expenses, it’s a good idea to fill out a new one and send it in with the 1040X. Finally, make sure to be as detailed as you can when explaining the changes just so there’s no confusion on either end.